Market Outlook 2022: The Continental Group survey reveals financials, technology and energy as favoured investment options

The Continental Group, a leading insurance intermediary and financial services provider in the GCC region, hosted a webinar titled ‘The Road Ahead’, enabling expert discussions on the global financial markets, the 2021 performance, and the predictions for 2022. The survey, conducted as part of the webinar, provided a sneak-peek into investor sentiments.

Tom Planterose, Senior Portfolio Manager, Sanlam Private Wealth UK; Paul Jackson, Global Head of Asset Allocation, Invesco; and Neelam Verma, Vice President & Head of Investments, Continental Group, were the key speakers, and the webinar was moderated by Anselm Mendes, Executive Director of Sales, The Continental Group.

The majority of respondents recognized Financials, Technology and Energy as the favoured investment options. “Predictions are part and parcel of financial advisory. But, if 2021 was anything to go by, financial markets can always surprise you. So, your best bet is to diversify your portfolio, conduct financial reviews, perform rebalancing as per performances, and stay focused on your long term goals making the role of financial advisors paramount,” said Neelam Verma, Vice President & Head of Investments at The Continental Group.

The equity rally in 2021 defied the earlier predictions, the pandemic cycles, and the rising inflation, inspiring widespread momentum investing. Meanwhile, the yield in government bonds continued to dwindle as the threat of inflation and economic uncertainties loomed large. The impact is such that, in the survey, about 50% of respondents said that high inflation is their biggest concern with respect to their investment portfolios.

“Inflation is the focal point for Central Banks in 2022. As a result, we could witness an increase in interest rates and their knock-on impacts, leading to volatility in equity markets. It is therefore advisable to be patient, do your due diligence, establish clear-cut goals, and focus on fundamentals — because merely buying into sentiments could be akin to catching a falling knife,” said Tom Planterose, Senior Portfolio Manager, Sanlam Private Wealth.

A whopping 81% of respondents said they expect the prices to rise faster than income levels. The rising inflation also accompanies a slowdown in economic growth and steady unemployment levels — a recession-inflation phenomenon, commonly termed as “stagflation”. This presents a dilemma wherein measures taken to combat inflation widens unemployment.

However, in the words of Paul Jackman, Global Head of Asset Allocation, Invesco, “2022 is about easing into market dynamics.” “Equity rally will slow down, and bond returns will improve. So, there will be convergence in margins, unlike the divergence we witnessed in 2021. As Central Banks remove support and stop buying assets, investors could take refuge in commodities for protection. The thumb rule is to not worry about what’s not in your portfolio but worry about what’s in there; buy what you understand and ignore the noise,” Jackman added.

His upbeat sentiment was echoed by 75 per cent of survey respondents, who said they expect the S&P 500 to yield greater than 5 per cent returns by the end of 2022. Experts believe that emerging markets too could yield similar returns, with the US, UK, and Indian bourses leading the charge. An uptick in Chinese growth and a potentially more economy-friendly Chinese government especially during the Beijing 2022 Winter Olympics should help the sentiments. Preference shall be for stocks and sectors benefiting from the economic recovery while the corona-virus crisis is continuing to fade. Looking at the GCC region, the banking sector is all set to benefit from the US interest rate hike expected in March 2022. With currency pegged to the US Dollar across the GCC ex-Kuwait, the Central Banks in the GCC shall follow the suit of US interest rate hike to align themselves, thereby leading to increase in lending rates by the bank and possible slowdown in the lending growth. Inflation has been a talking point, as most GCC economies witnessed accelerated inflation rates in Q4 2021. Overall, an increase in oil prices across the oil-rich GCC markets is expected to drive revenues upwards, resulting in more proactive government policies on spending in 2022.